A leading supplier of high performance network infrastructure solutions, QLogic Corp. (QLGC) continued to gain significant revenue market share in Fibre Channel adapters in the first quarter of calendar year 2011.
According to the latest reports provided by two leading industry research firms Dell’Oro Group and Crehan Research, QLogic garnered 55.0% of the total revenue share in the first quarter, beating its nearest competitor by 18.0 percentage points.
The strong market share growth was primarily driven by robust customer demand arising from higher enterprise information technology (IT) spending since 2010.
QLogic retained its #1 position in Fibre Channel adaptors for the seventh consecutive year in 2010, with 54.0% of the total revenue share, beating its nearest competitor by 16.0 percentage points.
We expect this trend to continue in calendar year 2011, along with a strong demand for QLogic’s converged networking technology. QLogic is expected to maintain its dominant position in this space on the back of key design wins in fiscal 2011 and strong product portfolio that will drive additional revenue growth for fiscal 2012.
In March 2011, QLogic announced the optimization of its third-generation 10GbE (Gigabit Ethernet) converged network adapter (3GCNA) for the Cisco Data Center Fabric. These products are designed to deliver any application to any location within the data center, across data centers or the cloud.
QLogic’s 3GCNA products combined with the Cisco Data Center Fabric deliver network to network convergence and intelligence for highly secure cloud computing and virtualized data centers.
As more and more original equipment manufacturers (OEM) deploy these products, QLogic will gain significant market share and see top-line growth in the data center connectivity market. We also believe that QLogic will benefit from major OEM customer wins over the long term.
QLogic reported strong fiscal 2011 results, with revenue increasing 8.8% year over year to $597.2 million. The year-over-year growth was driven by strong performance from Host Products (up 5.2% year over year) and Network products (up 7.1% year over year).
QLogic reported earnings per share (EPS) of $1.31 in fiscal 2011, beating the Zacks Consensus Estimate of $1.21. The better-than-expected results were driven by strong revenue growth and margin expansion.
Qlogic expects total revenue for the first quarter of 2012 to be in the range of $145.0 million to $153.0 million. QLogic did not provide any EPS guidance for the second quarter. Currently, the Zacks Consensus Estimate is pegged at 26 cents, a 13.0% increase from the 23 cents reported in the year-ago quarter. For further details please see QLogic Beats Estimates.
Recommendation
We remain Neutral over the long term (6-12 months) primarily due to tough competition from Emulex Corp. (ELX) and Broadcom Corp. (BRCM).
Currently, QLogic has a Zacks #3 Rank, which implies a Hold rating on a short-term basis.
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